Biodiversity extinction markets break down as prices soar.
Like the global carbon offset program, the international biodiversity extinction credit market is designed to organize the private sector’s responsibility to pay for the environmental consequences of their business activity. The specific goal is to incentivize companies to reach net-zero extinction-causing behavior.
Under the global extinction credit framework, any private enterprise that causes the extinction of a “non-intelligent” species is required to surrender one credit. But if it’s an “intelligent” species that has been lost, the responsible company must pay the heftier price of 13 credits to offset the extinction.
As you know, we’re generally fans of innovative market-based approaches to scaling environmental solutions. The extinction offset market seemed like it should work. But now we cannot ignore signs that things have gone badly awry.
Up to this point, our main concern with the program was that offset prices were too low, failing to capture the true costs of extinction. We worried that species-destroying enterprises would view the costs of extinction as manageable and feel no pressure to ameliorate their damaging ways. But now the tides have turned.
Pervasive hacking issues, speculative credit trading and the recent destruction of the DNA-bio-bank-species backup system have sent the markets into a tailspin. Credit prices are soaring, traders with shorts face devastating settlements, and extinction-causing companies are being hit with huge financial penalties. The entire program is at risk.